Published: June 18, 2013 at 10:29 am

The last time I wrote about Intuitive Surgical, Inc. (NASDAQ:ISRG), I devoted myself to dispelling false fears and shifting the focus to potential issues that could arise in an FDA probe. I now realize that there are a couple of issues that could further weigh on the company’s share price.

Probes can find too much

When a company is subject to regulatory oversight, the regulatory agency has the right to look at everything under its purview. The FDA started a regulatory probe into Intuitive Surgical, Inc. (NASDAQ:ISRG) due to an increased number of reports that something in Intuitive’s robotic da Vinci surgeries went wrong. The reporting standard is extremely broad and even the slightest hiccup is reported. In this case, many of the issues were the cables on the robotic arms breaking, but these can be fixed on site with no damage to the patient. However, as soon as the probe began, Intuitive informed its customers that there was a potential for electrical burns, though no actual proven cases, due to invisible cracks in the surgical scissors on the machines. The last time I wrote about Intuitive I gave very detailed numbers, and the whole point of the reporting system is that the FDA wants to spot potential problems as early as possible. This probe is not something I would consider out of the ordinary, but there is always a risk it will uncover something problematic.

When the FDA looks at the da Vinci system, it doesn’t just look at narrow criteria. Even minor issues could require Intuitive Surgical, Inc. (NASDAQ:ISRG) to do a redesign. A problem could not happen often and when it does not be a big deal, but it could still warrant a redesign without requiring a halt to use. For the patient, this is for the best, but it could be a pain for the company and impact earnings as procedures decline. Any redesign needs to be approved by the FDA and, if the FDA puts a moratorium on new procedures, it could be an extended period of time that Intuitive is not making money off da Vinci procedures.

Wait on Intuitive Surgical, Inc. (NASDAQ:ISRG), because the risk of further losses is substantial. If the FDA asks for more information before coming to a decision, the stock will tumble on fear. Even if the long-term outlook is positive there are short-term gale-force headwinds. The stock recently shot up when Intuitive scored a legal victory. Precedent matters, and one case decided in its favor means that cases that rest on similar grounds should go the same way. However, there are still a lot of obstacles in Intuitive’s way. A positive result from the FDA would probably send the stock up high, but it will probably be too risky for most.

Cleanliness to wellness

iRobot Corporation (NASDAQ:IRBT) is entering the medical robots field with a telepresence device for doctors. This basically allows a doctor who is somewhere else to make visits to patients through the use of a robot that can navigate hospitals and has a large screen and webcam. It seems a bit unnerving, but I see it as a good innovation. The robot could help patients see doctors sooner, even if only electronically. The doctor can log into one machine and see one patient, and then log right into another machine while the first one travels to the next patient.

It will take some time for patients and doctors to get used to the idea. Patients will appreciate being able to see a doctor sooner, but the human touch will be diminished. Additionally, there are significant applications in security, considering that the machine is just a hunk of motion-detecting and scanning equipment. Equip it with the glowing red eyes and you have a great robotic security guard.

These robots are not consumer products, which means pricing pressures are far less than for, say, tablets. There really is no other competition to the telemedicine robot except physical people. Additionally, there will be recurring service income related to the robots, which will help bring more evenness to iRobot Corporation (NASDAQ:IRBT)’s revenue stream. It is still early, but in the consumer goods segment, once the sale is made that tends to be the end of it until replacement time rolls around.

Recent earnings were strong for iRobot Corporation (NASDAQ:IRBT), with the company beating estimates on revenue and earnings. The company closed the year with no long-term debt and cash of $138 million, which is good for a company this size. For now, home robots account for 90% of the company’s revenue, and I will be eager to see telepresence change that. The medical use is the first such use, but there are many other possibilities.

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